March 2015

The Chinese government is chronically burdened with ensuring that 20% of the world’s population is fed from domestic resources that amount to 8% of the world’s arable land. While most underdeveloped nations struggle to feed their population in its current state, China is tasked with maintaining a high level of food security as its population continues to grow rapidly. Consistent food production is complicated by unpredictable weather patterns and an increasingly affluent population that is eating significantly more meat. Due to the country’s significant pollution, existing agricultural land has been intensively farmed with strong fertilizers and pesticides, many of which are banned by the World Health Organization. In addition, urbanization is rapidly eating up what viable farmland exists around cities. Since the 1990s, China has lost around 8.3 million hectares of arable land to urbanization[1]. As a result, China is importing more food than ever before.

By 2030, China is projected to raise its import share sevenfold if its economy continues to grow at its projected rate, while its share of exports of farm products is projected to dwindle. As a result, China’s agricultural self-sufficiency rate is projected in both scenarios to fall about ten percent if policies remain unchanged.

POLICY RECOMMENDATIONS:

The creation of a food security regulatory body: As China’s governmental departments relating to food security are numerous and their overlapping complex, it is our recommendation that a regulatory body be created specifically for the handling of regulations regarding food security. The China Food Security Regulatory Commission (CFSRC) will have a framework and a level of independence similar to that of the China Insurance Regulatory Commission[2]. The Chinese government will draft a bill to be presented during the upcoming plenary conference that gives the CFSRC wide ranging power and responsibility in maintaining food security. This will include ensuring the commission with the sole responsibility of collecting and distributing government awarded funds for the research and development of enhanced agriculture technology. The CFSRC will oversee partnerships and joint ventures to bring the most up-to-date agriculture technology to market within China. The CFSRC will also be in charge of overseeing the liberalization of the microfinancing market in the country’s agriculture industry. These processes will be more thoroughly laid out in sections below.

Increase in public agricultural R&D expenditure, specifically in biotechnology: China’s public agricultural research and development expenditure has risen considerably in recent decades but is still less than the Asia–Pacific regional average[3]. During the 1980s and 1990s Brazil invested more than four times as much as China in public agricultural R&D as a percent of national agricultural GDP. The country’s outputs of both crop and livestock products have more than doubled since the early 1990s, substantially increasing the country’s food security.

In addition to also boosting national income growth, such investments have strong potential to lower domestic consumer prices for several foods, an issue that the government has been highly focused on for more than a decade. A drop in consumer food prices will not only benefit farmers but also net buyers, thereby contributing to both the availability and access dimensions of food security. We strongly recommend this route over a food import restrictions, which raise domestic prices and thus benefit net sellers and harm net buyers[4].

The CFSRC will work with the government to determine the top priorities of topics for agriculture research and development. The commission will then award tenders to research companies that offer the most economical option for wide-scale technology distribution to small and medium sized farms, which make up the vast majority of China’s farms. It is recommended that China focus its research on labor-saving technologies in order to help farmers adjust to the country’s rising minimum wage and shrinking rural labor market.

One such labor-saving technology is the production of genetically modified (GM) crops. As global warming continues to shrink the globe’s percentage of arable land, agriculture biotechnology is an industry that is destined to grow, and China should be at the forefront of this expansion. In addition to increasing yields and lowering pesticide use, GM crops can also be engineered to withstand harsh growing environments, of which China has many. The country has already approved the commercial cultivation of two crops, cotton and papayas. China was one of the world’s earliest adopters of the technology through its cotton production. One study reported that widespread planting of biotech cotton in China drastically reduced the spraying of synthetic chemicals, increased the abundance of beneficial organisms on farms, and decreased populations of crop-damaging insects. Yields were increased by an average of 10 percent and generated roughly $220 per hectare of additional income for small farmers. From 1997 to 2010, China benefitted from an increase in income of nearly $11 billion US dollars through its GM cotton production[5].

While we fully promote the development of biotechnology, it is imperative that this development is met with adequate safety regulations and mandates set by the CFSRC. Chinese law currently states that organizations and individuals shall not apply GM technology to major crops without official approval. This approval should be determined by the joint work of the government and the CFSRC. The commission will oversee and regulate the creation of a market for public-private partnerships to facilitate access to biotechnology and the design of new crop varieties. The government should encourage these partnerships through financial incentives such as tax breaks or credits. A highly regulated biotechnology market coupled with a top-down promotion of GM crops and the awareness of its success its other countries (like that of the US) should be spread to garner public support.

The promotion of rural microcredit institutions: The majority of China’s farms are less than 5 hectares in size and generate modest profits. The absence of land and water tenure rights means that the majority of Chinese farmers cannot access credit to purchase more efficient technology to improve their agricultural efficiency. This issue adds to the cost of food production in China, and can be solved through the liberalization of the agriculture microfinancing sector. The country has seen great success in microfinancing in other fields such as telecommunications, health and education. Thus, the same business practices should be applied to a sector in dire need of increased efficiency and production. Freeing up capital markets so that more rural microcredit institutions can develop will reduce this constraint on growth outside urban areas.

As China’s water sources are growing increasingly scarce, we recommend that the government create financial incentives to urge farmers to engage in microfinancing contracts for the installation of drip irrigation. This could include a partial subsidy of the interest paid on the loan, or an annual tax reduction on all food products sold by farmers using a drip irrigation system. Currently less than one percent of farmable land in China is drip irrigated[6]. The challenge of meeting future human agricultural needs is to increase yield while decreasing the amount of water agriculture demands. The promotion of this type of agriculture technology should be widely promoted so as to allow for a cohesive shift towards reduced water consumption in irrigation over the short-medium term.

CONCLUSION

The suggestions outlined above will generate an increase in China’s food production and a reduction in the country’s water usage. The need for increased agriculture infrastructure and technology highlights the necessity of a liberalized microcredit market that allows farmers with an annual per capita income of only a few hundred dollars to conserve water and increase yields. These changes, along with consistent public expenditure for agriculture R&D, will allow China to maintain its robust food-sufficiency level while continuing to grow its population and economy.

[1] Vernooy, Ronnie. “For Food Security, China Tries an Alternative to Industrial Agriculture.” Solutions Publications. February 2012. Volume 3.

[2] The China Insurance Regulatory Commission is considered to have the most independent legal framework of all Chinese commissions.

[3] Anderson, Kym and Anna Strutt. “Food security policy options for China.” Australian National University. April 2014. Working paper No. 11.

[4] The majority of net buyers in China are made up of Chinese households below the $1.25 international poverty line.

[5] “Can Biotechnology Solve China’s Food Security Problem?” Wharton University, School of Public Policy. July 10, 2012.      

[6] Postel, Sandra. “Drip Irrigation Expands Worldwide.” National Geographic. June 25, 2012.